Flash Loans

What is a Flash Loan?

Flash loan is an instant collateral-free loan borrowed and repaid using a smart contract on a single transaction block. The contract carries all the transaction steps involved in borrowing and repayment. If any of the steps fail, all transactions are reverted, including the flash loan. Regardless of the success or failure of any transaction in a flash loan, the user pays fees for the transactions carried out.

Flash loan is a DeFi invention, popularised by Decentralized Applications (dApps) like Aave and dXdY. It's used for profiteering from financial instruments like arbitrage.

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